WTI crude remains above the $70 level - is it forming a top?
Crude oil closed 0.52% higher on Thursday, extending its volatile consolidation following last Friday’s rally. The sharp swings continue to be driven by escalating tensions between Israel and Iran. This morning, the market is down 0.8% once again on news related to the Middle East conflict.
For oil markets specifically, these developments are worth monitoring:
- The market remains concerned about potential supply disruptions through the Strait of Hormuz, a critical oil transit route. Although exports haven't been impacted yet, the threat of escalation keeps traders on edge.
- President Trump is expected to decide on U.S. military involvement within two weeks, keeping investors cautious. While he’s open to talks with Tehran, direct action remains a possibility.
- Thursday’s airstrikes between Israel and Iran pushed prices higher, with both sides showing no intent to de-escalate. Analysts suggest that any attack on oil infrastructure could push prices toward $100 per barrel.
- Citi analysts noted that oil prices have surged amid Israel-Iran conflict fears, but past disruptions show such spikes may not last. Historically, every 1 million barrel/day supply impact can raise prices 15–20%, but this doesn’t guarantee a sustained rally.
Conclusion
Crude oil is extending its short-term consolidation and is essentially moving sideways following last Friday’s rally. The FOMC monetary policy release on Wednesday had little market impact, and attention remains focused on the Middle East. The market may be forming a top here; however, no clear bearish signals are evident at this time.
For now, my short-term outlook is neutral.
Here’s the breakdown:
- Crude oil prices continue to fluctuate around recent local highs.
- The ongoing tariff-related volatility, combined with economic data, is adding to market uncertainty.
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Thank you.
Paul Rejczak,
Stock Trading Strategist
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